Consumer Sentiment Index Increase Was an Easy Call

The increase in the Thomson Reuters/University of Michigan Consumer Sentiment Index reported Friday morning aligns with what the Gallup Economic Confidence Index showed in January, and with what we anticipated the final Consumer Sentiment Index would show.

According to Reuters, the Thomson Reuters/University of Michigan Consumer Sentiment Index "unexpectedly improved in January as Americans felt Washington's deal to avert the 'fiscal cliff' at the beginning of the year boded well for the economy." This comes on the heels of the Conference Board's January report showing that its Consumer Confidence Index fell sharply in January.

Readers of Gallup.com, on the other hand, know that Gallup Daily tracking showed a clear rise in Americans' confidence in the economy over the course of January, and that, given that trend, the final Thomson Reuters/University of Michigan figure would likely come in above its preliminary estimate (see Wednesday's "Behavioral Economy" post).

Looking forward, the Conference Board's January Consumer Confidence mail survey should start reaching households today, and thus, Americans' perceptions about the economy over the next week or so will in large measure determine what the resulting Consumer Confidence Index will show when it is released at the end of February. If confidence remains improved, as it has thus far in Gallup Daily tracking, then we should expect to see a substantial gain in the Conference Board's index. Of course, today's generally well-received jobs and manufacturing reports will likely add to the momentum, overshadowing news of a fourth quarter decline in GDP. The risk is that analysts will ascribe all of the Conference Board's February gains to the jobs report, when in fact the positive trend started weeks earlier.

There are multiple factors to untangle in understanding consumer attitudes right now, including at a minimum the New Year's Eve fiscal cliff compromise, the January stock market rally, and now the jobs and manufacturing reports. Here at Gallup, we are looking carefully at how changes in our daily measure of consumer confidence relate to all of these, and in the coming days will have more to say on what that shows.